Secured Versus Unsecured Loans

However carefully you budget, there may come a time in your life when an extra cash injection is needed. If your savings are depleted then this will mean taking out a loan – but what type of loan?  Do you need secured or unsecured loans, and what is the difference anyway? Many property owners choose to take out secured loans, which are linked to a house or another major asset. Although a loan of this type generally allows you to borrow a higher amount, since it is secured against the value of your property, it carries risks attached. Put bluntly, if you fail to pay your secured loan then your home can be taken from you and sold to pay your debts – even if you owe significantly less than the value of the property. So why take out a secured loan in the first place? Other than the amount that it allows you to borrow, a secured loan can also involve significantly cheaper repayments than an unsecured equivalent. You can make it more expedient still by adding it on to the cost of your mortgage rather than taking out a separate secured loan. On the other hand, it is important that you have read the paperwork attached to the loan carefully and are aware of the risks. Unsecured loans tend to be more expensive, but may be suitable for those without any significant assets to their name. The crucial aspect to pay attention to if you are taking out a loan of this type is the Annual Percentage Rate (APR), which relates to the interest you will pay on the cash you borrow. APR can be charged at a fixed or a variable rate – sticking at a fixed rate is generally preferable unless you have a good idea of whether interest rates are going to rise or fall, because it allows you to accurately calculate your repayments. Regardless of what type of loan you plan to take out, it’s important to shop around for the best deal. You can get a selection of deals on loans using a price comparison site such as Beat That Quote, but it’s also worth checking with individual loan providers such as Alliance and Leicester to make sure you can’t get a better bargain in person. If in doubt, ask a reputable provider to explain your options to you in full.